World reports

Stocks to watch

AAP

2013-01-23

Weaker-than-expected inflation data released on Wednesday has given the Reserve Bank of Australia increased scope to cut the official interest rate when it meets in February.

The consumer price index (CPI), a key measure of inflation, rose 0.2 per cent in the December quarter, after rising by 1.4 per cent in the September quarter, the Australian Bureau of Statistics said on Wednesday.

In the year to December, the CPI rose 2.2 per cent.

An AAP survey of 15 economists had predicted a rise by 0.5 per cent in the December quarter for an annual rate of 2.5 per cent.

CommSec economist Savanth Sebastian said the data removed one hurdle from a potential rate cut decision.

"It highlights that inflation is well and truly contained," he said.

"It leaves the RBA decision in February open, as they have the opportunity to cut rates if they deem it necessary.

"It now comes down to whether they think the Australian economy is improving at a healthy rate."